Investors reduced their long positions on most Asian currencies in the last two weeks, spooked by tensions on the Korean Peninsula and signs that more major central banks are dialing back years of ultra-easy policy, a Reuters poll showed.

The poll was conducted from Tuesday to Thursday around the U.S. Federal Reserve`s latest policy meeting.

As expected, the Fed said on Wednesday that it would begin slimming down its bloated balance sheet in October, brightening the outlook for the dollar.

The Fed also signalled it still expects one more rate increase by the end of the year, despite recent weak inflation readings, helping push the dollar to near two-months highs and eroding the appeal of emerging market assets. KOREA TENSIONS

Investors have likely increased short positions on the South Korean won in the last two weeks, according to the poll of 17 analysts, traders and fund managers. Bearishness on the currency rose the most since April.

Persistent geopolitical tension in the Korean Peninsula has dampened investor appetite in the region, though knee-jerk selloffs in response to Pyongyang`s repeated sabre-rattling have largely been short-lived on hopes that war can still be avoided.

U.S. President Donald Trump and South Korean President Moon Jae-in were to hold talks on Thursday over North Korea`s nuclear programme, amid worries that Trump`s harsh statements about North Korean leader Kim Jong Un could lead to a miscalculation.

Trump said this week the United States may have to "totally destroy" North Korea.MOST EM BULLS ALSO PULLING BACK

However, the biggest shift in investor sentiment in the last two weeks was seen in the Chinese yuan.

Bullish sentiment towards the yuan fell the most since July, amid speculation that Chinese authorities may be growing concerned about the impact of its rapid climb on exporters and economic growth.

The yuan had surged some 7.5 percent against the dollar by early September -- fueled by dollar weakness and a long string of firmer central bank guidance -- but it has pulled back slightly since.

Earlier in the month, China`s central bank had scrapped two measures that were put in place to support the yuan when it was under significant selling pressure, suggesting Beijing is now anxious to quash one-way appreciation bets on the yuan as outflows ease.

Long positions in the Indian rupee hit lows not touched since January, according to the poll.

Investors were the most bullish on the Thai baht as the currency continued to strengthen supported by a strong current account surplus, investor confidence in the economy, and receding concerns over political risk.

While most investors expect the the Bank of Thailand to keep its benchmark rates steady at 1.5 percent at its policy meeting next week, ING believes otherwise, expecting the central bank to cut rates at its next meeting.

ING says the Bank of Thailand will lose some of its lustre if it does cut rates to support growth after resisting government pressure to ease policy and weaken the baht.

Thailand`s central bank said on Monday it had taken action against what it said was "periodic speculation" in the baht as the currency hovered at more than 28-month highs against the U.S. dollar.